$100s of Billions Will Pour into U.S. in 2018, How Much of that Capital Will Deploy in Manufactured, PreFab Housing?

Executive Summary

The combination of the new tax law, a growing economic boom, and talk by Apple and other tech giants of bringing back to the U.S. some $200-$400 Billion dollars in 2018 alone will create a search for valuable ways to deploy that capital.

With the affordable housing crisis widely publicized, housing is a trillion-dollar a year sector that is poised for even more growth.

As real estate and investment mogul Sam Zell has observed, when others are looking right, go left. Where is “left” in the housing industry?

A sector that has drawn – arguably for the wrong reasons – resistance and pushback. Who says? Harvard, among others.

There are already billionaires – including Zell and Warren Buffett – plus thousands of others deeply involved making plays in manufactured housing. That said, it’s still very much a ’boutique’ industry compared to others.

Plus, some of the ways the industry is being pursued are controversial, and feed into the negative narrative and perspective.

Click to read report, and see the Guardian video.

It is precisely because of the mistaken understanding and several arguably problematic practices that can make manufactured housing of interest to those willing to pursue the industry in a best practices, professional, and ethical fashion.

A general overview of housing growth, and expectations of capital pouring into the U.S. are summarized from CNBC reports and a video, below.

That’s followed by quotes, comments, and links that lay out facts – including the just-announced merger of manufactured home producers Champion Home Builders and Skyline Corp (SKY). Their stock surged on the news.

Or as Sunshine Homes President John Bostick – a client company whose experienced serious growth at a pace far higher than the industry at large has said – “Easy doesn’t pay well.” But intelligent, sustained effort can yield, as it has for them, growth rates that are more than double those of the industry at large, and in the more attractive residential product side. That’s where the biggest opportunities are in manufactured housing, without ignoring the that there is also growth potential for commonly pursued ‘entry level’ manufactured homes.

Investor Take Away

This is one of those ‘look left’ opportunities within the manufactured home industry. While much of the industry pursues ‘entry level,’ or ‘shade and shelter’ product, the results being achieved by Sunshine and others using more upscale product reveals what real estate research also reveals. This is where arguably the growth opportunities are in manufactured homes today.

This isn’t easy, but smart money is deployed and being attracted in manufactured homes and communities, using this approach. An example is shown in the video below.

Third Party Reports, Quotes that Point to far Greater Potential

Recent concerns over housing affordability for low-income households appear to be difficult to resolve by developing policy options that focus only on traditional single-family owner-occupied dwellings and/or rental apartments. In terms of developing a housing policy that would improve the quality of housing for lower income families, it seems appropriate to explore the merits of an often-ignored alternative, namely manufactured housing. – Eric Belsky, Harvard.

“Credit is the lifeblood of housing”.Eric Belsky, Harvard.

At the time Belsky made this prediction, manufactured homes were selling over 250,000 new units per year. This year, MH won’t reach 40,000 of that total. What happened?

Several tech sector giants are making related plays in PreFab or Modular housing – precisely for the kinds of reasons that Belsky cited. But they have not yet made announced moves into far more affordable manufactured housing ‘done correctly.’

Applying Zell’s mantra of looking where others aren’t as focused, and exploring the causes of why manufactured homes aren’t already soaring yields some surprising insights for those willing to make the long term plays, as Warren Buffett and Sam Zell have done.

But it is arguably precisely by ignoring some of the problematic parts of the Buffett dominated Manufactured Housing Institute (MHI) moves that the greatest opportunities may be found. Because they are either clumsy in carrying out their own agenda, and/or clever in setting the table in a way that is choking off smaller firms that is leading to an accelerated consolidation of them by larger ones.

With hundreds of billions coming into the U.S. expected in 2018, will some of that find its way into MH? Would it surprise anyone if it does, given that billions have already gone into community and other acquisitions?